Democrats Eye Cunningham Deal

Posted June 13, 2005 at 6:53pm

Democrats are calling for a full-scale investigation of Rep. Duke Cunningham’s (R-Calif.) sale of his San Diego home to a defense contractor.

Cunningham sold his home in San Diego in November 2003 to a Nevada-based corporation owned by Mitchell Wade. Wade is president of MZM Inc., a defense contractor specializing in classified intelligence work. The Nevada corporation, for which Wade is the only officer, lost nearly $700,000 when it resold the home more than eight months later.

As a senior member of the House Appropriations and Intelligence committees, Cunningham helps oversee contracts awarded to MZM. The Defense Department reported that MZM received $65 million in federal contracts in fiscal year 2004, placing it 37th among all defense-contracting firms.

The San Diego Union-Tribune first reported Cunningham’s home sale on Sunday.

In a statement released Monday, Cunningham denied any wrongdoing in his dealings with Wade. Cunningham insisted that the house he sold to Wade went for a price that was in line with other home sales in the area.

Cunningham used a local real estate firm to help establish the sale price, although the actual sale was a private transaction between Cunningham and Wade’s Nevada company. The San Diego realtor, Elizabeth Todd, and her husband, Whitney, donated $3,000 to Cunningham’s re-election campaign in the 2001-02 election cycle, according to federal campaign records.

“Mr. Wade was interested in purchasing our home,” said Cunningham’s statement. “[Wade] received comparables from an independent source establishing the value of the home. He made an offer based on that evaluation. Nancy and I accepted that offer. I have no reason to believe the value of the house was inflated then, and I have no reason to think so today.” Nancy Cunningham is the lawmaker’s wife.

Cunningham added: “I am proud of my 35 years of public service in both the U.S. Navy and the House of Representatives and can assure my constituents that this was an aboveboard transaction.”

Still unclear are the nature of his contacts with Wade regarding the home sale, where these discussions took place and how they originated. Why Wade used the Nevada corporation to purchase the home is also unexplained.

In an interview with the San Diego Union-Tribune, Cunningham said he was already planning on selling his home when Wade expressed interest in purchasing it.

“I tried to sell my house,” Cunningham told the newspaper. “And I told a bunch of other people I wanted to sell it when Mr. Wade said, ‘Hey, I’ll buy it.’”

Democrats immediately pounced on the news of Cunningham’s home sale, suggesting it was a sweetheart deal structured to improperly benefit the eight-term lawmaker.

“It looks like a bribe from this distance,” said Bob Mulholland, communications director for the California Democratic Party. “It smells, and hopefully the Congressional ethics committee will take this issue up.”

Jennifer Crider, press secretary for House Minority Leader Nancy Pelosi (D-Calif.), used the controversy around Cunningham’s home sale to both bash Cunningham and prod Republican leaders to break a six-week stalemate within the ethics committee over staffing. The ethics panel has not been able to undertake any investigative work this session as GOP and Democratic leaders have struggled over ethics rules and staff makeup.

“This is precisely the sort of allegation that a non-partisan, functioning Ethics Committee would consider: Did Mr. Cunningham receive an illegal gift and or violate provisions of the criminal code that prohibit the receipt of something of value in return for official action? Or was this a fair market value home sale?” Crider wrote in an e-mailed statement. “Republicans should immediately stop blocking the Ethics Committee’s organization and allow the Committee to do its work.”

Wade, a former Pentagon manager, founded MZM in 1993. The company’s Web site says the firm specializes in “intelligence collection and analysis,” and it has a $5 million contract to provide interpreters in Iraq.

MZM recently hired Kay Coles James, the former director of the Office of Personnel Management, as a senior executive vice president. Former Army Brigadier General Jonathan Cofer, who specialized in anti-terrorist operations while in the military, is another top company official, according to federal campaign donations records, as is a former top aide for the Senate Appropriations Committee.

Wade himself donated $2,000 to Cunningham’s re-election campaign in the 2001-02 cycle, and another $4,000 in the 2003-04 cycle. MZM’s PAC gave $6,000 to Cunningham’s campaign, and $5,000 to Cunningham’s leadership PAC, American Prosperity PAC.

Wade purchased the San Diego home from Cunningham for $1,675,000 in November 2003, with the Nevada corporation, 1523 New Hampshire Avenue LLC, as the buyer. 1523 New Hampshire Ave. NW is the address for MZM’s office in Washington.

The home that Wade purchased from Cunningham, located in the Del Mar area of San Diego, was later sold for $700,000 below the original price less than nine months later.

Wade was unavailable for comment on Monday, and an official with MZM, Scotty Brumett, said he did not know when Wade would be available.

There are several ethics statutes that could come into play if an investigation is initiated into Wade’s dealings with Cunningham, including conflict-of-interest rules. The House Code of Official Conduct “prohibits any Member, officer, or employee from receiving any compensation or allowing ‘any compensation to accrue to his beneficial interest from any source, the receipt of which would occur by virtue of influence improperly exerted from his position in the Congress.’”

A bribery or illegal gratuity case against Cunningham would rest largely on whether Wade paid an excessively high price for Cunningham’s home in return for an official action, noted several ethics experts, and would be difficult to prove.

Whether or not Cunningham should have disclosed his financial relationship with Wade when voting on legislation affecting Wade’s company, either in the Appropriations or Intelligence committees, is another open question, according to these experts, who declined to be named for this article.

Cunningham acknowledged to the San Diego Union-Tribune that he supported spending provisions benefiting MZM.